Franchising Insight

Franchises offering health-care products and services are expected to grow along with the aging boomer population. Here's a look at systems catering to this business segment.

Shopping for a franchise? Why not pick one in a field that will boom?

Three years ago, Marcia Turner began her quest for what she believed would be the perfect franchise-investment opportunity: one that would appeal to the largest number of consumers who live near her Rochester, N.Y., home. In short, it had to appeal to Rochester-area baby boomers, that huge segment of the U.S. population born between 1947 and 1965.

"This is the way to boost the odds of succeeding," the small-business consultant and writer says. "A successful business has customers interested in buying what it wants to sell and that ties closely with what's happening demographically in your community."

At first, Ms. Turner considered buying an environmentally-friendly dry-cleaning franchise, which would have given her a way to profit from the "green" movement spawned by the boomers. (She backed out because she felt that the franchiser "wouldn't be a good fit".) Now she's in the early stages of looking at another boomer-oriented franchise operation: Once Upon a Child, a unit of Minneapolis-based Winmark Corp. which operates a chain of consignment stores specializing in top-quality children's clothes.

"Parents and grandparents born in the boomer years are spending more than ever before on their children and grandchildren, especially on clothes," says Ms. Turner, herself the mother of two.

Ms. Turner's approach to choosing a franchise investment geared to the nation's 77 million-plus boomers is a good call, say demographers and some small-business experts.

"The baby-boomer demographic trend is one of the most obvious we have ever seen," says Richard Hokenson, a New Jersey-based demographics consultant and former Wall Street investment strategist. "It's remarkably predictable, and it can either boost a business's growth or constrain it if the founders get it wrong. Everyone wants to find a way to tap into that market."

Jumping aboard the baby-boomer bandwagon may be a savvy move. A 1995 study for the U.S. Small Business Administration linked success of new franchises to system growth, which depends, in turn, on the franchise's ability to tap into growing demand for a product or service, says Bruce Phillips, senior fellow at the National Federation of Independent Business Research Foundation.

"The No. 1 area where things are growing is anything related to health care or aging--things like home-care aides for seniors to billing services for doctor's offices," Mr. Phillips says.

Elder-Care Assistance

Paul Hogan set out to fill a void in home-health care when he and his wife launched Omaha-based Home Instead Senior Care in 1994. His mother had cared for his grandmother in the family home for more than a decade. Later, working in the corporate office of Merry Maids, L.P., a Memphis-based franchise chain offering home-cleaning services, he saw the need for an alternative as baby boomers turned to Merry Maids to help out their elderly parents.

"The problem was that [Merry Maids] wasn't a service that was geared to the elderly person's needs," Mr. Hogan says. Instead, it was geared to "getting in and doing the job quickly," he says. Expecting more baby boomers to grapple with this dilemma, he developed a business format for offering light housekeeping, meal preparation--and companionship--and now has 426 franchise outlets in 45 states, Canada, Japan and Portugal.

"The long-term potential for this industry is really unlimited, I believe," he says, noting that baby boomers who are seeking out services for their parents now will one day use them themselves.

That's what convinced Christian Steiner--a former nursing-home volunteer-- to buy a Manhattan-based Home Instead Senior Care franchise a year ago after leaving his law practice a few months earlier. The boomers, Mr. Steiner says, "are the wealthiest, biggest demographic ever seen, and a financially great market to tap into. It's an industry with great growth." A year after he paid his $22,500 franchise fee, his profitable franchise has 85 employees working with up to 60 senior citizens on any given day.

Seeking Lasting Needs

With aging baby boomers creating such conspicuous needs, it's easy to spot other ways to profit from their wants and needs.

Don DeBolt, president of the International Franchise Association in Washington, D.C., notes that growth rates are higher for casual-dining franchises than for classic burger chains, as boomers appear willing to pay extra for comfort and fresher, more nutritional foods.

Boomers, he adds, are more able and willing than previous generations to spend heavily on their children and grandchildren. "Anything that plays into children is very strong, whether it's education, security or entertainment," Mr. DeBolt says. The biggest challenge, he says, is making sure a new trend will be more than a short-lived phenomenon.

"You've got to focus on what people still will need in five to 10 years," he adds.

Experts also note that even boomer businesses aren't insulated from broad-based economic trends. For instance, baby boomers are willing to spend heavily on travel, especially for trips offering unique experiences. Still, travel agencies catering to that group suffered along with the industry in the wake of the Sept. 11, 2001, terrorist attacks. The best course of action when shopping for a business, says Mr. Phillips, is to consult industry organizations for insight. "Then, you have to make sure those demographics are reflected in the community where you want to open your business," he advises.

Tapping into Trends

Some new franchise owners are counting on boomers to adopt new habits. In Libertyville, Ill., a Chicago suburb, Alice Scott is hoping her up-market neighbors will acquire the European custom of buying flowers for their homes--preferably from her new KaBloom franchise, which will carry as many as 50 different kinds of flowers. (KaBloom, based in Woburn, Mass., began selling franchises in 2001, and now has 31 franchisees.)

"This has the potential to be another Starbucks," Ms. Scott says.

David Hunt, in contrast, has been tapping into an existing trend among boomers--a desire to keep their hearts healthy and their joints flexible. He's been a General Nutrition Centers franchisee for more than a decade now. At his four Arizona stores, baby boomers are big spenders.

"We are well-positioned to hit the baby boomers--that one demographic that everyone fires at," declares J.J. Sorrenti, general manager for GNC Franchising, a unit of General Nutrition Companies Inc. in Pittsburgh. GNC's products "are there for us boomers who are trying to take our healthy lifestyles with us as we age," he says.

The Millennials

Baby boomers also have created a new market for GNC products in their children, says Mr. Hunt.

"Our Tucson store is right outside the gates of the University of Arizona and was a gamble for us--we didn't know [whether] the demographics would work," he says. But mothers bring college-bound children into the store to buy vitamins--and these Generation Y consumers return later for sports-nutrition products and smoothies from the store's smoothie bar.

"The demographics are expanding beyond the boomers, and that's even better for us," says Mr. Hunt.